Sales-tax hike's roots lie in pension increases

Key votes in 1996 and 2002 boosted top 20 pensions for San Diego city workers by 176 percent

Correction

This story has been amended from its original, which had an incorrect estimate of the average increase in pensions for the city's Top 20 pensioners caused by 1996 and 2002 votes by the City Council. The estimate was the result of a flaw in the methodology provided by the San Diego Employees’ Retirement System. The revised average increase of 65 percent is based on improved methodology after collaboration among The Watchdog, the retirement system and William Farrar, president of the Retired Fire and Police Association of San Diego.

COMING MONDAY: Who are San Diego’s top 20 pensioners, and what would their pensions have been without key city votes in 1996 and 2002?

The push for a half-cent increase to San Diego’s sales tax has just begun, but it actually goes back to past decisions by city leaders who chose short-term political expediency over the long-term interests of taxpayers.

The deals struck by labor leaders and city officials in 1996 and 2002 created a financial windfall for thousands of city workers, some of whom enjoy double or triple the pensions they would have under the previous program, according to an analysis of pension records by The Watchdog.

For example, the highest-paid retiree in the city’s pension system, former Assistant City Attorney Eugene Gordon, would have been due an annual benefit of roughly $64,600 after his 34 service years if city leaders hadn’t significantly increased retirement benefits.

Instead, bumped-up pension formulas entitled him to more than $155,000 annually when he retired in 2008. Factor in cost-of-living adjustments and special add-on programs approved by past city administrations and his current annual take is about $187,000.

To put that in perspective, a private retiree would need a nest egg of $3.8 million earning 5 percent a year to produce an income stream to equal $187,000 in the first year, plus 2 percent annual cost-of-living adjustments the city allows.

That person would be out of money after 30 years, whereas the city pension is in place for life.

The Watchdog reviewed data for Gordon and the city’s other 19 top pensioners. It found that, on average, pension boosts and programs approved by the city made them eligible for pensions 65 percent higher than they would have been.

The analysis did not account for individual circumstances such as beneficiary payout decisions, but applied pension formulas to data made available by the city’s retirement system to find the effect of the 1996 and 2002 decisions on expected payouts.

Boosted pensions and the subsequent economic recession created a $2.1 billion pension deficit that has hamstrung the city. Library hours have been slashed. Maintenance of parks and beaches has been scaled back. Police units have been eliminated, and the city idles up to eight fire engines a day to save money on overtime.

The financial problem is so bad that Mayor Jerry Sanders and the City Council are asking voters to approve the tax hike on the Nov. 2 ballot. The increase wouldn’t go into effect until the city enacts certain changes to employee pensions and city operations.